Technology - The Good, the Bad and the Ugly

Stephen Crosbie, Protection Director at Aegon talks about how we use technology in the protection market and what we should be thinking about in future.

Within the protection industry, we've generally been slow to embrace technological advancements, and customer expectations are much greater than we’ve been able to provide. This presents great opportunities – but if we don’t rise to the challenge, someone else will.

Living in a digital world

No matter where we are or what we do, technology plays an ever-increasing role in our day-to-day lives. From controlling our heating via our smartphones, buying a coffee via contactless payments to monitoring and tracking our health and fitness via mobile apps – we live in a digital world.

So how has the protection industry adapted to this digital age? Slowly is the answer – making those who work in it exposed to someone adapting quicker than us. However, it’s not all bad.

The good

There’ve been some good technological advances that have made the buying, selling and processing of protection policies easier – creating efficiencies for advisers and provider while helping to reduce costs and prices for customers.

• Comparison engines - have completely revolutionised how advisers quote, compare and advise on protection products – allowing them to shop around and get the best price at the click of a button.
• Independent product databases - have dramatically reduced the time required to review and research the options available to customers.
• Adviser back-office systems have also developed in line with technological improvements providing operational efficiencies.
• Life offices - have gone some way to automating their back-office systems too – allowing decisions to be made quicker, faster communication between insurer and adviser and ultimately better outcomes and decisions for your customer.
• Underwriting engines - have delivered speed and flexibility allowing underwriting decisions - including indicative loadings - to be made quicker with some allowing you to quote, underwrite and buy multiple protection products from a range of providers - in one single process.
• Claims - arguably the most important part of the protection service, paying a claim when the customer needs it most. New innovators, such as Lemonade, have introduced a mobile first, digital service that aims to make paying a claim on protection quick and simple. Innovations in technology such as electronic death certificates can also help pay claims quicker.

So, there can be no doubt – advances in technology has allowed the protection industry to streamline its processes and has helped providers and advisers to cut costs and reduce prices for customers.

The protection industry has changed for the better due to technology improvements.  Unfortunately, it’s not all good.

The bad                                             

Technology is driving us down the road of individual pricing. As we get better at understanding the risks associated with individuals, we can give them an individual price. This is good news for many, but more and more of society will be rated – where protection cover will either become unaffordable or we’ll deem the risk associated with that individual too great and they’ll become uninsurable.

• Quotes – force providers to be in top three to secure business. Ultimately this forces us down a preferred life route resulting in fewer and fewer of the population getting that price.
• Product comparisons – critical illness being an example of a product that we’ve made so complicated that you need a comparison service with all its algorithms to figure out which one will provide the best coverage.
• Underwriting engines – they may allow immediate decisions, but do we run the risk of making cover more expensive for the most vulnerable – or worse still, not offering any type of cover at all?

As insurers, we should be pooling risks so cross-subsidies exist. The peace of mind of the many cross-subsidises the few that need to claim. Understanding risks to a level of detail where you can accurately price isn’t necessarily a good thing – leading to selective practices where more and more of the population will find it harder to get affordable cover. Are we in danger of making protection cover a bespoke solution for the individual? We should view digital technology as a fantastic opportunity to improve access to protection for the masses.

The ugly

As an industry, I believe we’re failing society. The need for protection is still there, yet we seem incapable of increasing the coverage of the population. How many times have you heard – ‘It won’t happen to me’ but the reality is - it does, and the consequences are clear to see.  

• The NHS is already creaking at the seams and isn’t really there to help with the financial consequences of the family breadwinner dying, getting a critical illness or being unable to work because of illness or injury.
• The welfare state also struggles to provide the support that the majority of families need and is unlikely to financially compensate your clients to the standard of living they were accustomed to.
• There’s a growing reliance on charity for support - for example, Macmillan Cancer Support. If we’re able to protect more of the population by offering more cover – it eases the burden on charities.
• Market growth remains a challenge. Advisers are massively important – it’s not an easy conversation and customers won’t buy themselves – they need advisers to motivate them to act.

So how do we use technology to help us increase access to the masses? We need to start thinking differently.

The future – we need to start thinking differently

Customer expectations have grown way beyond what we’re delivering and the fintech start-ups are eyeing up our market. Going forward, it’s crucial we deliver protection solutions in a way customers expect from other industries, for example, Amazon. To do this, we need to consider what the new fintech start-ups are thinking about and who will start to disrupt our industry.

Some things to consider…

• Artificial intelligence - whilst in its infancy could see the advent of more than just a calculator tool to help customers understand their protection needs.
• Online signatures - are becoming an accepted norm that will remove paper from the protection journey altogether.
• The power of crowds – crowdfunding, affinities or community groups where people don’t mind cross-subsidising each other.
• Pooling people together in a different way where everyone pays an average premium, rather than the cheapest. Could this be regarded as ethical premiums because they allow people to be protected who might not have qualified through a more rigorous underwriting process?
• Guaranteed over 50’s products – why are they so popular – everyone gets something. Can we work with this concept?
• Trigger sales – for years protection has been triggered following a mortgage loan but what if it was buying a car or insuring a pet?

Technology is developing at speed. It allows us to think differently and we’ve a fantastic opportunity to use it to increase access to protection products and serve more of the population.